European Commission won't grant Romania functional market economy status

Romania did not get the much-coveted functional market economy status in the European Commission’s 2003 country report, despite the ardent lobbying of the Bucharest administration. Still, Romania did get a diplomatic wording that attempts to sweeten the bitter pill, as the European Commission says, “Romania can be considered as a functioning market economy once the good progress made has continued decisively.” The functional market economy status is a sine qua non condition for Romania to be able to conclude the European Union accession procedures and sends the message the Romanian economy has the capacity to cope with competitive pressure and market forces within the Union.

Romania feels it can conclude accession negotiations by the end of 2004, to be able to join the EU in 2007, a deadline deemed as feasible in the country report.

The European Commission recommends Romania to continue privatising the energy sector and to root the causes of the continued accumulation of arrears to the budget and the energy sector. Moreover, restructuring in key sectors, such as energy, mining and transport must be brought forward, as these are essential criteria needed to meet the economic accession conditions.

The report highlights the progress made towards macroeconomic stability, as inflation continued to decline from a relatively high level, despite further adaptations of regulated prices. According to the European Commission document, the external position remained sustainable and fiscal policy prudent. Measures to improve tax administration are being progressively put into place. Privatisation and restructuring of public enterprises have accelerated, the report says, whereas public ownership also decreased in a banking sector that continued to develop its intermediation role. Administrative improvements of market entry and exit mechanisms were undertaken along with various initiatives to improve the business environment.

The commitments to control the total wage bill in the public sector were broadly respected and some actions were taken to enforce enterprises’ financial discipline, most notably a somewhat higher disposition to disconnect energy users in arrears, the report shows.

Although the report mentions Romania fulfills the political criteria, the experts in Brussels warn that corruption continues to be widespread, affecting the entire society. Therefore, the European Commission is urging Romania to make “substantial efforts” to fight corruption. iulian.anghel@zf.ro